Banks and building societies launching old-fashioned 'dinosaur' accounts that tie up your money for months

Banks and building societies are launching old-fashioned accounts that tie up your money for months in a bid to attract savers.

Notice accounts — where you are required to give up to 180 days’ advance warning that you want to withdraw your money — had fallen from favour in recent years as banks and building societies launched new easy-access accounts.

But, now, these dinosaur accounts are back.

Notice accounts: Fallen out of favour in recent years - but these dinosaur accounts are back

Banks claim they give customers more choice. But critics argue the variable rate accounts are an attempt to hold on to savers’ money and pay very little extra interest to do so.

Last week, Virgin Money launched its Virgin 90-Day Notice Saver account with a rate of 2.28 per cent after tax (2.85 per cent before tax).

You agree to give the bank three months’ notice if you want to withdraw some money.

So, essentially, Virgin is hoping savers will be willing to lock their money away for three months in return for an extra £20 a year interest after tax on every £10,000.

Once you have sat out three months, you have a 14-day window to remove your money.

If you miss it, you have to start the wait all over again.

Nationwide, along with its brands Cheshire, Derbyshire and Dunfermline building societies, has also launched new 75-day notice accounts paying 2 per cent (2.5 per cent). The rate is boosted by an initial bonus of 1.2 (1.5) percentage points.

You have to give 75 days’ notice that you are withdrawing your money from the account.

You can take it out straight away, but you will lose the equivalent of 75 days’ interest.

This brings your return down to 1.59 per cent (1.98 per cent), less than you can earn on an easy-access account. Once your bonus disappears, the rate drops to just 0.63 per cent (0.79 per cent).

Susan Hannums, director of savings advice website Savingschampion.co.uk, says: ‘Banks and building societies use these accounts to hold on to your money as long as possible rather than satisfying customer demand.’

Kevin Mountford, savings expert at Moneysupermarket, says: ‘These accounts work very well for banks.

‘The industry wants to create demand for them, so they have warning before money moves away from them.’

A Virgin spokesman says: ‘Different customers have different needs. We offer them the choice.’

Savers can earn better rates by sticking to easy-access accounts elsewhere. They can earn more than 2.4 per cent (3 per cent) with postal or internet-based accounts and retain easy access to their money.

If you want to stick to the High Street, Virgin, Newcastle and Leeds BS easy-access accounts pay better rates than Nationwide’s 75-Day notice account.

If you have an old notice account, move your money as they pay a pittance.

Halifax 60 Day Notice Gold and RBS 30 Day Savings and 60 Day Savings pay a miserly 0.08 per cent (0.1 per cent). With C&G 90-Day Notice, the rate is just 0.04 per cent (0.05 per cent).

Both Nationwide and Virgin have old notice accounts closed to new savers that pay less than their latest versions.

Virgin closed the old Northern Rock account at the start of this year. All savers in its old Access 30 and some in Access 60 and Access 120 pay lower rates than the 90 Day Saver.

Nationwide pays just 0.24 per cent (0.3 per cent) on its 60 Day Direct.